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8 On Your Side: Bill could remove payday loan protections

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LAS VEGAS – Taking out a payday loan is rarely a good idea. Many companies charge high interest rates, and customers can easily get in a trap where they spend years paying off the loans.

If you get a payday loan, be warned. These companies may soon have more leverage over customers. Nevada law offers consumers some protections from payday loan companies, but that could change.

If Senate Bill 123 passes, it would allow payday loan companies that offer long-term loans to sue customers who default on their loans.

“Somebody can get sued after paying for twelve to fourteen months on this loan, and then get sued at the end for more interest,” said consumer advocate Venicia Considine.

Considine says this can hurt payday loan customers who are already strapped for cash.

“The average income nationally of people who go to payday loan lenders is about $22,400 a year,” she said.

Considine says she feels the current laws obligate lenders to ensure anyone they give money to can pay it back. Senate Bill 123 would change that, and it could keep people trapped in a cycle of debt for a long time.

“It’s a lose-lose for the consumer,” she said.

You can voice your opposition to the bill by contacting your state lawmaker.

If you are in trouble with payday loans, the Legal Aid Center of Southern Nevada can help. Their services are free.

If you have a problem you want investigated, contact 8 On Your Side at 702-650-1907.

[…]

Payday-loan measure advances in Senate | Local News | The …

Originally published June 9, 2013 at 7:37 PM | Page modified June 9, 2013 at 10:13 PM

With only a few days left in the special legislative session, a controversial proposal backed by Seattle-based payday lender Moneytree advanced another step. It was one of five policy bills moved by the Senate Rules Committee along with the Senate budget.

Critics of Senate Bill 5312 are crying foul, saying the proposal is an end-around previous payday-lending legislation that reduced predatory lending practices and that it shouldn’t be part of budget negotiations.

The bill would allow payday lenders to make a new type of loan of up to $1,500 with effective interest rates that could top 200 percent. The installment loans would have repayment periods from six months to 18 months.

Currently, payday lenders can lend up to $700, and those loans have to be repaid on the borrower’s next payday.

Sen. Sharon Nelson, D-Maury Island, has been one of the most vocal opponents of the bill since it was introduced in January. She said she disagrees with the claim that it is a necessary jobs bill.

“That’s just not the case,” Nelson said.

Nelson said the “harmful effects of predatory lending” would offset any jobs that would result from the legislation.

“Right now, all we should be dealing with is the budget of the state of Washington,” she said.

Jim Richards with Statewide Poverty Action Network echoed Nelson’s concerns.

“Apparently allowing one company to increase its predatory lending that preys on the working class and on the poor is more important than passing a state budget,” Richards said.

Sen. Steve Hobbs, D-Lake Stevens, the prime sponsor of Senate Bill 5312, said it was “an attempt to get rid of payday lending and replace it with something better.”

“It would be something of a compromise between payday lending and traditional bank loans.”

“I’ve never liked the payday industry,” Hobbs added.

He said he has two amendments he would like to see added to the bill.

He said one would prohibit military personnel from taking out the loans — something the Department of Defense has insisted on since the bill was first introduced. Hobbs said his other amendment would reduce some of the fees associated with the proposed loans.

He also said he didn’t think he would be able to vote for the bill if at least one of the amendments weren’t adopted — a decision that he acknowledged might sound surprising given he’s the prime sponsor.

Republicans control the Senate with the help of two Democrats, known as the Majority Coalition Caucus.

Hobbs said he’s not sure why the Majority Coalition Caucus is pushing the bill so hard. He said he’d prefer to see his bills related to renewable energy or aircraft excise taxes taken up instead.

“But it’s not my decision,” Hobbs said.

The other policy bills moved out of the Senate Rules Committee were: a bill relating to workers-compensation settlements; one that would cap non-education spending, a proposal regarding toxic-cleanup projects; and a bill that would give school principals veto power over which teachers are assigned to their schools.

[…]

By Any Name, Predatory Payday Lending Is Still a Debt Trap | Third …

It’s been awhile since I blogged about payday lending, so let’s recap a little bit.

Payday loans are made in small amounts but come at an extremely high cost, typically carrying annual interest rates of 300% or higher. They are called payday loans because they generally must be paid back in full, with all interest and fees, on the borrower’s next payday. Believe it or not, payday borrowers are twice as likely to file for bankruptcy as applicants whose request for a payday loan was denied by the lender.

Pennsylvania does not currently have thousands of payday loan storefronts as you will find in states like Florida and Utah because our state law puts a low cap on the interest and fees that payday lenders can charge. Loyal readers will remember that in the last legislative session Rep. Chris Ross of Chester County introduced — and the House passed — legislation to open the door to payday lending in Pennsylvania. The bill died in the Senate.

Ever since, payday lenders have been lobbying state Senators to reintroduce the bill. Their efforts paid off late Friday afternoon when Senator Pat Browne introduced Senate Bill 975 and hastily scheduled a vote on the bill in the Banking and Insurance Committee today.

Senator Browne says that his legislation responds to criticisms raised about last session’s bill. So let’s review what exactly is in Senate Bill 975:

SB 975 allows a total of $38.22 in fees on a $300, 14-day loan. With these fees, this loan could carry a 332% annual percentage rate (APR). In addition to the high cost, SB 975, just like last year’s bill, explicitly authorizes other predatory terms such as requiring direct access to a borrower’s bank account as a condition of the loan, thus allowing the payday lender to stand first in line for repayment on payday. SB 975 allows at least eight “consecutive short-term” loans with excessive fees and interest exceeding 300% APR. This eight-loan limit is not really a limit because a borrower need only wait three days to borrow again and the loan count is reset to zero. So essentially there is no limit. As the U.S. Department of Defense explained, even when periods between payday loans are separated “by a couple of days or a week, the borrower is still caught in a cycle of debt.”

So the key features that made last year’s effort to expand payday lending such a bad idea remain in effect.

One difference: this time around Senator Browne is calling it a “micro loan” program. Many of you may have heard of micro-lending, a program first made famous in Bangladesh, in which very small loans are made to people to start small businesses. (While initially these programs were praised, later evaluations have shown them to fall short.)

When people hear “micro loan,” perhaps they will think of the franchise Ten Thousand Villages, which sells fair trade baskets, jewelry, and crafts made by people from poor communities all around the world. That is certainly a better image than what comes to mind when you hear that lawmakers are contemplating short-term loans that charge an APR over 300%.

The reality is payday lending, by any name, takes advantage of people in financial distress. It compounds their problems by trapping them in a cycle of borrowing that, while profitable for the payday lender, often leads to more financial distress for the borrower, including bankruptcy.

You can send a message to your state senators here to let them know you oppose SB 975. And to keep up on this issue, be sure to bookmark and tell your friends about the great work being done here.

[…]

Payday Lending – California | IRP Poverty Dispatch

Bill would limit number of payday loans to any one borrower, By Alejandro Lazo, April 17, 2013, Los Angeles Times: “A bill before the California Legislature would restrict the number of payday loans to any one borrower — an attempt to break the ‘debt cycle’ that ensnares some of the state’s poorest residents. Senate Bill 515 would bar the high-cost, short-term lenders from making more than six loans a year to any borrower. The bill, set to go before the Senate Banking and Financial Services Committee on Wednesday, also extends the minimum term of a payday loan to 30 days from 15…”

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